Argenx: Shares Look Undervalued Ahead of Key Vyvgart Data Readouts but Still Building a Moat

We’re initiating coverage of autoimmune disease-focused biotech firm Argenx ARGX with a $486 per ADS fair value estimate, and we think shares look undervalued ahead of several expected data readouts later this year for the company’s central drug, Vyvgart, in new indications. Vyvgart received Food and Drug Administration approval in December 2021 as a treatment for myasthenia gravis and has generated strong sales for the past several quarters, and the launch in international markets is just beginning. Imminent pivotal data for the drug as a potential treatment for another neurology-related indication, chronic inflammatory demyelinating polyneuropathy, as well as data expected in the fourth quarter in hematology (idiopathic thrombocytopenic purpura) and dermatology (pemphigus vulgaris and pemphigus foliaceus) should begin to give us a clearer view of Argenx’s potential to expand Vyvgart’s label into multiple additional autoimmune conditions. We include probability-weighted Vyvgart sales in nine indications beyond MG in our forecast, with probabilities ranging from 30% for smaller phase 1 and phase 2 programs to 70% for the pivotal ITP program, which already has positive data from one phase 3 trial. We think Vyvgart could generate nearly $3 billion in annual sales by 2032 in MG alone, with nearly $9 billion in total annual sales that year across multiple indications. However, we assign the firm a Very High Uncertainty Rating and do not yet award the firm an economic moat, as the view of Vyvgart’s potential across autoimmune diseases is still fuzzy. In addition, several similar drug candidates could be vying for share, as UCB’s Rystiggo was approved in June in MG, and J&J and Immunovant both have FcRn inhibitors advancing in trials. While Argenx is first in class, competitors could launch with stronger efficacy, although we’re impressed with Vyvgart’s safety profile, and an exclusive license from Halozyme gives Argenx access to differentiated subcutaneous dosing technology.